Note 1 – Accounting principles
The quarterly report has been prepared according to the IFRS standards that have been adopted by EU as well as the interpretations of the valid standards adopted by EU, IFRICs. This report has been prepared according to IAS 34, Interim financial reporting. In addition to the financial reports and their accompanying notes further information according to IAS 34.16A can be found in other sections of the quarterly report. New standards and interpretations have not had any material effect on Group accounting.
The parent company reports have been prepared according to the Swedish Company Accounts Act and RFR 2, Accounting rules for legal entities.
The quarterly report has otherwise been prepared according to the same accounting principles and conditions described in the Annual Report 2016 except the new additional consolidated accounting principles for Investment property which are described below.
Additional accounting principles
Property is classified as project and development property, operations property and investment property. Investment properties are properties owned for the purpose of income from rent or appreciation or a combination of both. After a revision of Peab’s property portfolio it was decided that some property previously reported as project and development property, i.e. inventory properties, will instead be classified as operations property or investment property, in the case where there is no plan to divest the property and it is expected to remain in the Group for the foreseeable future. Individual properties are reclassified forwardly from the point in time the purpose of the holding changes.
Investment property, like operations property, is recognized in consolidated accounts at acquisition value minus accumulated depreciation and any write-downs. The acquisition value includes the purchase price and costs directly attributable to putting the asset in place in the condition required for utilization. Borrowing costs are included in the acquisition value of internally produced investment property.
Income from rent of investment property is recognized linearly in profit/loss for the year based on the terms in the leasing contract. Income from divestiture of investment property is normally recognized on the date of taking possession unless the risks and benefits have been taken over by the purchaser at an earlier date.
Depreciation is made linearly over the estimated useful life of the asset. The Group applies component depreciation, which means that depreciation is calculated on the estimated useful life of components. Components are primarily divided into buildings and land. The component land is not depreciated since its useful life is considered endless. Buildings, however, consist of several components that have useful lives which vary between 20 – 100 years.
Disclosure of fair value
The fair value of investment properties is disclosed in the Annual Report. The valuation is based on an internal valuation model. Annual external market valuations for a number of objects are also obtained as a complement to this valuation.
New IFRSs and interpretations that have not yet been applied
IFRS 15 Revenue from contracts with customers, will as of 2018 replace current standards related to revenue recognition. Peab does not intend to prematurely apply IFRS 15 and is currently in the final phase of analyzing its effects. At this point in time no material effects have been identified but the analysis must be completed before any possible final effects can be quantified.
IFRS 9 Financial instruments, will replace IAS 39 Financial instruments: Recognition and measurement, as of 2018. Peab is working on an analysis of the consequences IFRS 9 will have on the Group’s result and position. The standard will have some effect on the recognition of credit losses since it requires loss reserves for anticipated credit losses. Peab does not plan to prematurely apply IFRS 9.
IFRS 16 Leases, will replace IAS 17 as of 1 January 2019. Peab does not plan to prematurely apply the standard. Peab’s balance sheet total is expected to increase through activating contracts that are currently classified as operational. Peab estimates that the balance sheet total will increase by around two to five percent but the analysis must be completed before any possible final effects can be quantified.
Further information on the effect of new IFRS standards on the Group’s result and position is found in the Annual Report 2016.